Correlation Between Capital One and Synovus Financial

Can any of the company-specific risk be diversified away by investing in both Capital One and Synovus Financial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Capital One and Synovus Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capital One Financial and Synovus Financial Corp, you can compare the effects of market volatilities on Capital One and Synovus Financial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Capital One with a short position of Synovus Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Synovus Financial.

Diversification Opportunities for Capital One and Synovus Financial

-0.58

Correlation Coefficient

Capital One  Synovus Financial

Excellent diversification

The 3 months correlation between Capital and Synovus is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Synovus Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synovus Financial Corp and Capital One is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Capital One Financial are associated (or correlated) with Synovus Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synovus Financial Corp has no effect on the direction of Capital One i.e., Capital One and Synovus Financial go up and down completely randomly.

Pair Corralation between Capital One and Synovus Financial

Assuming the 90 days trading horizon Capital One Financial is expected to under-perform the Synovus Financial. In addition to that, Capital One is 3.73 times more volatile than Synovus Financial Corp. It trades about -0.06 of its total potential returns per unit of risk. Synovus Financial Corp is currently generating about 0.1 per unit of volatility. If you would invest  2,518  in Synovus Financial Corp on September 13, 2024 and sell it today you would earn a total of  40.00  from holding Synovus Financial Corp or generate 1.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Capital One Financial  vs.  Synovus Financial Corp

Capital One Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital One Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Capital One is not utilizing all of its potentials. The new stock price confusion, may contribute to short-horizon losses for the traders.

Synovus Financial Corp

Risk-Adjusted Performance

7 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Synovus Financial Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Synovus Financial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Capital One and Synovus Financial

The main advantage of trading using opposite Capital One and Synovus Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, Synovus Financial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Synovus Financial will offset losses from the drop in Synovus Financial's long position.

The idea behind Capital One Financial and Synovus Financial Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.